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Combustion Industry News
Date posted: 15th Jul 2017
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  Patrick Lavery
  
  Combustion Industry News Editor

Trump administration lays out plan for energy ‘dominance’

US President Donald Trump has announced a new American energy policy, with the theme being ‘energy dominance’, in which the US becomes an exporter of energy rather than an importer, and therefore less reliant on countries Mr Trump characterised as “foreign regimes that used energy as an economic weapon”. Pointing out that the US is now the number one producer of natural gas, and a ‘top’ producer of oil, he described the US as being in the “driving seat” in terms of energy, saying the US would “export American energy all over the world”. The policy measures to support these ends are: easing financing restrictions on overseas coal projects, opening up new offshore oil and gas leases, conducting a study into how to revive the nuclear industry, approving the sale of more US gas to South Korea, approving export of LNG from a terminal in Louisiana, and approving a new oil pipeline to Mexico. In his speech, Mr Trump also mentioned that the US might re-join the Paris Agreement on climate change if it was renegotiated. The new policy has received a cautious welcome from Kevin Book of the Center for Strategic & International Studies, who warned that US talk of trade protectionism may harm export of energy, and that domestic policies must be harmonised.

A debate has been taking place amongst academics as to whether the US could meet nearly all of its energy needs affordably from wind, solar and hydroelectric power, backed up by storage as hydrogen and underground thermal systems, by 2055. A 2015 paper by a group led by Stanford civil and environmental engineering professor Mark Jacobsen put forward a plan the group claimed was feasible, but a rebuttal came last month from another group, including University of California, San Diego professor of energy policy David Victor. The rebutting group argued that the proposing group’s plans would lead to “wildly unrealistic expectations” and “massive misallocation of resources” harmful to the economy. It alleged that miscalculations had been made as to the amount of hydroelectric power that could be deployed, as well as the cost of underground thermal energy storage. The rebuttal itself was rebutted line by line by the proposing group, saying “there is not a single error in our paper.” While the divisions in the debate seem stark, in fact both groups agree that a transition to near zero-emissions by the timeframe is possible and important – it is the mix of technologies which is in question, with the rebutting group arguing that a wide range will be necessary (including, it seems, fossil fuels with carbon capture), and that to develop some of the necessary technologies will not be a straightforward task. The sense of the MIT Technology Review article is that the rebutting group is the more realistic, as do other commentators, but time will be the judge.

The G20 has agreed to act to address excess steelmaking capacity after the US raised the prospect of imposing tariffs if there was no action. As part of the pledge, members have agreed to deadlines, to increased transparency about state subsidisation, and to fight protectionism, although there is a clause which allows tariffs to be imposed if action to curb excess capacity is not enforced. The agreement is likely to be welcomed by US and European steel producers, though Chinese producers are unlikely to welcome it – China had previously pledged to reduce steelmaking capacity, but US and European governments felt that efforts so far have been insufficient. Whether the fresh agreement will be effective remains to be seen.

Japanese firms together plan to build 41 new coal-fired power plants over the next decade, as industry seeks a form of baseload power to replace the nuclear fleet shut down after the Fukushima nuclear disaster of 2011, according to a Reuter’s report. The article highlights the tension between the country’s environment ministry and the industry ministry, with environment minister Kouichi Yamamoto saying “It doesn’t matter if they are highly efficient or not, power stations using coal are seen outdated as EU (European Union) and other countries are moving away from them.” Mr Yamamoto believes that if the plants are built it will be difficult for Japan to meet its target to reduce carbon emissions by 26% from 2013 levels by 2030, and his ministry has floated the idea of implementing a carbon price. The industry ministry, however, is opposed to such a move, and has pointed out that oil and coal are already taxed, and there is an existing ‘environment’ tax. The environment minister has also expressed his disappointment at the USA’s intention to withdraw from the Paris Agreement on climate change.

India’s recent turn away from coal has seen a reversal, with the state-owned utility NTPC planning to invest US$10 billion (€8.8 billion) in new superciritical plants over the next five years. If approved, the first phase of the plan would see three plants built with a combined generation capacity of around 5 GW. Although some coal plants have been idle in India of late (leading to some stories about the decline of coal in India), planners at NTPC appear to believe that this will not last, as more of the 300 million Indians not currently enjoying electricity are brought onto the grid in coming years. NTPC’s plans have been met with concern by environmental groups, who would prefer India to concentrate on renewable energies. Along those lines, the article notes that NTPC’s plans to increase renewable capacity to 10 GW by 2022 has met with a familiar problem for thermal plants – land acquisition issues – though on the other hand, costs to install solar power in India at now reportedly at world-record lows.

Reuter’s John Kemp has written about the perils North American shale oil producers are currently running, with a huge ramp-up in production threatening to lower the oil price into territory which makes production uneconomic. The cause of the surge in production, symbolised by the threefold increase in oil rigs operating in the Permian Basin of Texas and New Mexico since April 2016, has been the higher oil price resulting from OPEC’s decision late last year to reduce output. Producers are generally able to make a profit with the oil price around US$50/barrel, but the surge in production has led to higher production costs due to the higher demand for production service equipment and expertise. Producers, many of whom were making losses in 2015/16 and were hoping for a rebound in oil prices to return to profitability, are now seeing their share prices drop as the oil price falls from its peak in February this year. Mr Kemp concludes: “Either the drilling boom moderates very soon, or WTI prices are likely to fall below $40 per barrel to make it stop.”

Following the news in the last edition of Combustion Industry News that Mississippi state regulators had declined to allow Southern Company to raise prices to cover further development costs for the coal-gasification and carbon capture-equipped Kemper power plant, Southern and its subsidiary Mississippi Power have announced that they will suspend work on the coal gasifiers. The plant will continue to operate on natural gas. Southern sees the move as a precursor to further talks with Mississippi regulators as to cost recovery for the rest of the plant, though the company must be bitterly disappointed to have to make the announcement.

Zambia’s majority state-owned Zambia Consolidated Copper Mines Investment Holdings is to partner with China’s Sinoconst to build a US$548 (€481 million) cement plant, according to a report from Reuters. The plant, to be built near Ndola in the country’s copper belt, will have a daily output capacity of 5000 tonnes, and feature two 20 MW coal-fired power plants to power the facility. The government is pursuing the plant as a means of diversifying the economy, which is heavily reliant on copper.

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